The Exquisite Irony of Dieselgate.
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
As corporate falls from grace go, few have been quite as sudden or spectacular as Volkswagen’s. Over the last month, since the “defeat device” has been publicly exposed, executives have tried desperately to pin the blame for the dieselgate scandal on anyone but themselves. VW shares have fallen 25% and are now roughly 50% down from their March high.
The fallout from the dieselgate scandal is not limited to Volkswagen. Other big car manufacturers are suffering the consequences of a generalized crisis of confidence in the sector. Renault’s shares are down 21% over the last month; PSA Peugeot Citroën has lost 17%; Daimler, 16%; Toyota, 13% and BMW, 9%.
For shareholders, the carnage has been relentless. And now they want someone to blame, as Euractiv reports:
A group of 19 major investors in the ShareAction coalition, including AXA and four Swedish pension funds, have recently addressed a letter to nine of the biggest car companies, asking them to explain their lobbying positions on emissions standards, particularly in the United States and the European Union, where the rules are currently being revised.
The letter also called on manufacturers to provide details of their relations with regulators concerning emissions standards and the amounts of money they give to professional associations, like the European Automobile Manufacturers’ Association (ACEA).
The irony is exquisite. After all, the car manufacturing industry has for decades enjoyed an immense amount of lobbying influence in Brussels, home to the second biggest lobbying industry in the world [read: Full Steam Ahead for the EU Gravy Train]. It’s unlikely that the likes of AXA, which itself is among the Top 50 biggest corporate spenders in Brussels, are unaware of this fact. Which kind of makes you wonder: where was all the fuss about corporate lobbying before the scandal?
In 2014, car manufacturers and their trade associations spent more than €18 million lobbying in Brussels. The top three industry spenders are all German manufacturers: Volkswagen, BMW and Daimler. Volkswagen is by far the biggest spender of all, with almost €3.5 million spent in 2014, roughly five times the outlay of the biggest non-German manufacturer, Fiat-Chrysler (€700,000).
€3.5 million a year – that goes a long way in Brussels. But it’s not just money that counts: in terms of personnel, Volkswagen is also miles ahead of its competitors: Daimler has 14 staff lobbying in Brussels. BMW has 8. VW has 43, almost double the other two combined. The highest non-German manufacturer is Honda, with 10 lobbyists.
What all that money and personnel gets you above all is access and influence, reports Corporate Europe Observatory (CEO). A look at Commissioners’ meetings during their first six months in office shows that the car industry met a Commissioner or a cabinet member over twenty times, with three-quarters of these being German manufacturers or trade associations.
Given the coziness of relations between industry and regulators, it’s not much of a surprise that the Commission did absolutely nothing to address the emissions “issue” despite having known for years that actual emissions by cars driven on real roads are much higher than those measured during official laboratory tests. The Wall Street Journal:
Already back in 2011 a study, conducted by the commission’s own Joint Research Center, warned that road tests showed NOx levels exceeded European limits at times by as much as a factor of 14. In such tests, known as a Real Driving Emission test, a so-called portable emissions measurement system is installed on a vehicle, which is then driven on regular streets, at different temperatures, speeds and road conditions…
Crucially, that report said such a test “appears to be more effective in preventing the detection of emissions tests by vehicles and thus the use of defeat strategies under normal conditions of vehicle use.” That note is interesting, because the commission had made defeat devices illegal already back in 2007, six years before the 2013 study was published…
In other words, the Commission was perfectly aware that Europe’s biggest car companies were skirting its regulations and breaking its laws but did absolutely nothing to address the issue. Asked why it had taken no action the Commission said that responsibility for enforcing emission rules was “in the hands of the member states.”
In the wake of the scandal the European Automobile Manufacturers’ Association (ACEA) has accepted that emissions tests should more closely resemble real-world driving conditions, but asked the European Union to implement the new standards progressively – a concession already ruled out by the NGO Transport and Environment (T&E).
The VW scandal has shown industry’s ability to cheat or manipulate the emissions legislation on an unprecedented scale. Manufacturers have also successfully delayed and tried to weaken the RDE proposals. It is now time for member states to ensure cars are as clean on the road as in the laboratory.
By Industry, for Industry
Despite all the furor over dieselgate, VW & Co are poised to have an even greater role in shaping regulation and legislation over emissions and other vital product and market issues – and not just in Europe but on both sides of the Atlantic.
If the Transatlantic Trade and Investment Partnership (TTIP) is signed – as its sister pact TPP was earlier this month – it will grant the transatlantic car industry just about every item on its extensive wish list, including cutting red tape and establishing the mutual recognition of standards across both markets. This includes the same testing standards, as CEO warns:
The danger with ‘mutual recognition’ of each others’ auto rules is that it puts the lower standard on an equal footing with the higher standard. It allows industry to pick the cheapest, less stringent option. And with a trade agreement such as TTIP, industry will be given all the chances in the world to prevent stronger regulation. Should one party want to strengthen control, it could be stopped by the other…
Considering how badly the EU has fared with its emissions rules so far, is it a good idea to put the entire testing regime on the trade negotiations table? As far as industry is concerned, it is.
Governance by big industry, for big industry, helped along the way by Commissioners who just can’t wait to get on the other side of the revolving door. This is the EU, a paradise for corporate lobbyists and money-grubbing apparatchiks. By Don Quijones, Raging Bull-Shit.
“Volkswagen has shafted us all.” Read… “Problems Likely to Snowball from Here,” at World’s Second Largest VW Factory